The Committee on Taxation was called to order at 3:50 p.m., on Thursday, April 15, 1999. Chairman David Goldwater presided in Room 3142 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Guest List. All Exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

COMMITTEE MEMBERS PRESENT:

Mr. David Goldwater, Chairman

Mr. Roy Neighbors, Vice Chairman

Mr. Bernie Anderson

Mr. Morse Arberry, Jr.

Mr. Greg Brower

Mrs. Vivian Freeman

Ms. Dawn Gibbons

Mr. John Jay Lee

Mr. Mark Manendo

Mr. John Marvel

Mr. Harry Mortenson

Mr. Bob Price

Ms. Sandra Tiffany

GUEST LEGISLATORS PRESENT:

Senator Mark James, Senate District 8

STAFF MEMBERS PRESENT:

Ted Zuend, Fiscal Analyst

Nykki Kinsley, Committee Secretary

OTHERS PRESENT:

The bill made three changes to the Senior Citizens' Property Tax Assistance
Act to expedite the claims and to accelerate the payment of refunds under the act. Additionally, the bill first changed the dates for filing a refund claim from between January 15 and April 30 to between February 1 and April 15. Second, the bill reduces the time from 45 days to 30 days that a county assessor had to process the application. And finally, the bill accelerated the refund date from September 30 to August 15. The last change, which was the most important feature of the bill, would allow seniors to receive the refund by the time the property taxes were due and payable.

Chairman Goldwater introduced Senator Mark James as primary sponsor of Senate Bill 36. Senator James thanked the Chairman and members of the committee for scheduling his bill. He began by explaining the bill resulted from a letter he received from a woman who was a constituent of his in Las Vegas who relied on a particular refund or rebate to pay her property taxes, but it did not come in time for her to do so. The rebate was actually received after the taxes were due. As a result of hearing that, he wanted to change the dates. The dates were changed in the original bill but that did not work with the Department of Taxation. It was amended in the Senate with his support, and the dates the committee now had were dates with which they could work in terms of getting that accomplished in time.

He was informed at the beginning of session the lady who had contacted him had passed away. It was unfortunate the bill would not be able to help her, but there were many others who were situated like her. He urged the committee's support and offered to try to answer any questions they might have.

Chairman Goldwater asked if there were questions from the committee for Senator James. There being none he asked if they had received testimony on the Senate side indicating it would be workable with the counties and the assessor's office. Senator James responded in the affirmative stating Dino DiCianno from the Department of Taxation testified and proposed changing the date from September 30 to August 15, so it was all workable.

Chairman Goldwater asked if that would be workable for the assessor’s and the counties and was advised in the affirmative by Mr. DiCianno, deputy executive director of the Department of Taxation.

Chairman Goldwater asked for further testimony from audience and recognized Ms. Byington. Barbara Byington introduced herself as the Douglas County Assessor and advised the committee the assessors had no problem with the changes.

Chairman Goldwater thanked Ms. Byington and noted the bill appeared to be a very meritorious piece of legislation and asked if there was anyone in the audience that wished to testify in support or opposition to S.B. 36. Seeing none he indicated he would accept a motion.

ASSEMBLYMAN MARVEL INTRODUCED A MOTION TO

PASS SENATE BILL 36.

MOTION SECONDED BY MR. NEIGHBORS.

THE MOTION CARRIED UNANIMOUSLY.

The Chair explained he had been informed by the assistant for Senator Schneider that he was not well and not available. Chairman Goldwater had offered to postpone the bills; however, his assistant indicated he wished the bills to be heard at that time. In lieu of the Senator presenting the bill he indicated Ms. Foley would present the bills on his behalf. He advised Ms. Foley, if she was comfortable with that, he would open the hearing on S.B. 383.

Included as part of the record is a bill explanation (Exhibit C) prepared by Ted Zuend, fiscal analyst, and Legislative Counsel Bureau.

Ms. Foley introduced herself and indicated on this issue, she was representing ALLTEL, which was the largest, wireless provider in southern Nevada. In the early 80’s when the cellular industry first started in Nevada, there were only two companies allowed in each area. The original companies in Las Vegas were Centel and Cellular One. Cellular One eventually was taken over by AT&T and Centel Cellular became Sprint Cellular then 360 Communications and now ALLTEL. She had been representing them since they were Centel Cellular. They received notice in those early days from the Department of Taxation they would be taxed for their property through local assessment. It was not called cellular any longer it was called wireless because of personal communications systems (PCS) and cellular.

Ms. Foley acknowledged they had always had a very good relationship with the local assessors in their areas. Some of the rural counties did not have wireless service, but those that did had a very good relationship. They also worked very closely with business licensing departments regarding zoning for all of the cell sites they had to create. In 1998, they received some requests from the Department of Taxation about their financial affairs, and they were a bit intrigued by that because they were not regulated by the State of Nevada like other utilities. The Public Service Commission used to have a minor role with cellular when there were only two companies in each of the major metropolitan areas. But now the only requirement they had was simply to register, so if there were complaints, they knew who to contact. They believed very strongly they should continue having their taxes paid by local governments and through local assessment. S.B. 383 would simply put into law what was current practice.

She called the committee's attention to the top of the bill, "affect to local government, affect to state government," where it indicated a negative response after both questions. There was no fiscal impact on having wireless and cable television. On page three, lines 17, 18, and 19, talked about companies engaged in providing commercial mobile radio service. That was the technical term for wireless. Relative to radio or television transmission services or cable television services the bill specifically stated those companies were not currently taxed through central assessment at the state level and that was the way they would like for it to remain.

Ms. Foley explained the reason they had brought that before the legislature was because twice in 1998 they had received inquires from the Department of Taxation that they would like to investigate the possibility of taxing them centrally rather than locally. They did not feel that was appropriate. The biggest difference was that it was for property tax. At the state level with a central assessment for utilities, the Department of Taxation used something that referred to intangibles, and they taxed intangible property. They did not want that situation to occur with wireless, as they believed it began that way because those companies, in the earlier days, were monopolies. They were taxed that way. They could take a look at shares of stock, at the goodwill of a company, the customer list a company had, the contracts and trademarks, and all different kinds of franchises and licenses. That could be taken into account for the value of property. She always thought the value of property was based upon geographic features, certainly the location of property. She knew her property at home was assessed that way. The value of a piece of property was where it was located and how it was zoned. They were very pleased with the way things had occurred since the early 1980’s when they first came on line and they did not want that to change. That was why the bill had been introduced and why it was unanimously supported in the Senate Taxation Committee as well as on the floor of the Senate.

Chairman Goldwater thanked Ms. Foley for her testimony and asked if there were questions from the committee and there were none. He added the committee did not like the personal property tax, but it did exist. It was an honor system tax and, if people were not paying it, they should be. He then recognized Ms. McMillan for her comments.

Margaret McMillan, representing Sprint Telecommunications, pointed out there was one other provision in the bill that Ms. Foley did not address, and that was in section 1. That section of the bill clarified that those companies whose property did not cross the county or state line, should be subject to local assessment. Central assessment was initially started because of companies whose property crossed various lines, the taxes were paid into the state, and then the state allocated those taxes back to the individual counties. In that particular case, the only company subject to central assessment that was located wholly within one county, Sprint was the local telephone company in Las Vegas. All of their customers and all of their physical property were located within Clark County so they had been centrally assessed. They had been paying those taxes into the state, and it all came back to Clark County anyway. The bill clarified the company would be locally assessed as it should have been all along. Since Sprint had a wireless company, they also supported the provisions Ms. Foley mentioned. She thanked the committee for their consideration.

Chairman Goldwater asked for questions from the committee and recognized Mr. Marvel for a question.

Assemblyman Marvel asked Ms. McMillan if the Department of Taxation retained a collection fee for the counties, adding it would be better for the counties if they did. Ms. McMillan stated she was not aware of it if they did.

Chairman Goldwater asked if there were other questions from the committee for Ms. McMillan or Ms. Foley and seeing none, he called on the next witness, Fred Hillerby.

Mr. Hillerby introduced himself and stated he was representing Airtouch Communications adding he would attempt not to be redundant and repeat what the committee had previously heard. He felt what really helped clarify the issues was section 4, the original language in sub-paragraph one. The committee would see what was contemplated with central assessment, and he believed Ms. McMillan had mentioned that. Those were the type of utilities and other public service entities that had property such as railroad lines, telephone lines, and electric wires that crossed county lines. The bill was simply to clarify that in the case of the wireless industry they did not have property that crossed county lines and paid taxes at the local level. They were paying property tax, and it was paid to the counties where they actually had physical property located. He stated they would appreciate the committee's support of the bill.

Chairman Goldwater pointed out mines were also centrally assessed then asked if there were any questions for Mr. Hillerby. There being none, he then called on Bob Gastonguay.

Mr. Gastonguay, representing the Nevada State Cable Telecommunications Association located in the State of Nevada, stated they supported the bill and believed they should be locally assessed as they had always been locally assessed through their franchises. Federal Government had stated through its 1996 Communications Policy Act that they would control cable television, through the Federal Communication Commission (FCC) and through local governments via their franchises. They believed they should be locally assessed. He thanked the committee for allowing him to testify on the bill.

Chairman Goldwater called upon Mr. DiCianno, deputy executive director, Department of Taxation with a question from Mr. Marvel. When the centrally assessed phone companies remitted their assessment to the Department of Taxation for an eventual refund, did the department keep any portion of that. Mr. DiCianno responded in the negative.

Chairman Goldwater next called on Robert Ostrovsky for comments or questions.

Mr. Ostrovsky indicated he was appearing on behalf of Cox Communication at the request of Steve Schorr. He wanted to indicate Cox Communications was locally assessed by the Clark County assessor and had always been locally assessed even when it was Prime Cable, the prior owner of the system. They believed the bill was the fair and proper way for their company to be assessed, and they should not be at the central level. They belonged at the local level, and that had worked very well over the years. They encouraged the committee to support the bill as they felt it was a good and fair piece of legislation.

Chairman Goldwater thanked the witness and asked the committee if there were any questions. There being none, he called on Mr. Barengo.

Testifying next was Robert Barengo representing AT&T, AT&T Wireless. He also supported legislation and would not reiterate what anyone else had said. He wanted to mention reason the wireless industry was not regulated by the Public Utilities Commission was because it was a highly competitive industry, and there was no longer a need to regulate it.

Chairman Goldwater asked if there were any questions for Mr. Barengo. There being none, he called on Ron Reynolds who introduced himself as the director of Property Taxes for Nevada Bell Wireless. He indicated he was going to limit his comments to just a few minutes; however, he did want to expand a little about the actual nature of wireless. Additionally, he wanted to present an argument to the committee he did not think had been brought before the committee. If they went back and looked at the way the wireless service environment was created from Congress, one of the things they would begin to notice right at the beginning was that it was created totally different from wire-line telephone companies. It was recognized that the most that the most efficient way for wire-line telephone companies to operate initially was as a monopoly. Wireless companies were set up in a competitive environment from the very beginning. He did not know if the term "universal service doctrine" meant anything to the committee members, hopefully they had heard it before. Basically, what that stated was because wire-line telephone service was recognized as a necessity for the general public, there were things put into place to make certain the price of that service was at such a level everybody could afford it. He submitted to the committee that wireless was never put into place that way.

Wireless telephone service currently, as it was 12 years ago when the decision was made in the state to locally assess it, was a discretionary service. Not everybody could afford wireless service, but it was out there for a particular market. There was a niche in the market that subscribed to wireless. They had experienced wireless prices coming down dramatically over the past few years, but he would still submit to anyone that if they looked at the penetration rates nationwide as to the actual people who could afford wireless service, percentage was still very small compared to wire-line penetration. Wireless service was not a regulated utility in any shape or fashion. It did not have any special rights or privileges. It did not have the right of eminent domain. Its rights were set in a competitive environment, not in a monopolistic environment.

Chairman Goldwater interjected that the history of the wireless industry and its reasons for existing were good, but the points that specifically related to centrally, versus local assessment would be of particular help.

Mr. Reynolds added, because wireless was a discretionary service and because discretionary services were purchased by the consumer from disposable income, he felt the State of Nevada recognized that was why it was locally assessed. It was put into an area where it had been taxed by other local main street businesses, and that was where he felt it belonged.

Chairman Goldwater thanked the witness and asked if there were questions from the committee. Finding there were none, he thanked Mr. Reynolds and called on the next witness.

Hal Holmquist introduced himself and indicated he represented Sprint PCS, Sprint Long Distance and Sprint Central Telephone Company. He wanted to ask the committee's support of the bill. S.B. 383 basically attempted to maintain the status quo on wireless carriers to continue maintaining a local assessment jurisdiction for them. The current practice was that wireless carriers and cable television companies were currently locally assessed and they felt as though they should continue to be locally assessed. Additionally, the assessment jurisdiction of any company that operated wholly within one county, should fall on the county assessor and not with the state assessment body. The bill had nothing to do with any kind of intangibles but was simply a jurisdiction bill that determined whether or not the property should be locally assessed or state assessed. S.B. 411 would be discussed at some point in the future that did address intangible issues. He volunteered to answer any questions.

Chairman Goldwater asked for questions from the committee. Seeing none, he thanked Mr. Holmquist and asked for anyone else wishing to testify in support or opposition on the bill. He then brought up to the witness table Mr. Hadfield and Mr. Grady.

Robert Hadfield introduced himself indicating he was the executive director of the Nevada Association of Counties and with him was Tom Grady, the executive director of the Nevada League of Cities. Mr. Hadfield had prepared a handout for the committee (Exhibit D) and wished to let the committee know the industry representatives did not receive it until a few minutes before the beginning of the committee, therefore, he did not expect them to be able to respond to a series of questions that were asked. They did not participate in the dialogue on the Senate side as they were following some guidance given to them in that regard.

Mr. Hadfield explained he thought it was important that the committee should know they did not disagree with the industry. There were some tax fairness issues. The Nevada League of Cities and the Nevada Association of Counties shared a greater, broader concern which really over-reached the single issue before the committee today; the inadequacy of Nevada’s tax structure to accommodate the fast developing changes in the telecommunications industry and the technological conversions, deregulation, and proliferation of service providers, all of which he thought the industry had addressed. They knew the national action in deregulation of the telephone industry meant the tax system originally conceived as applying to a small number of entities would put incumbent phone companies at a disadvantage. They also understood technology was changing very rapidly and the tax system in Nevada certainly did not begin to address the new tax environment that they were entering into and would likely see in the future. He recognized property tax bases did not do a lot for his company and they had attached a map of the State of Nevada as of 1994 showing the committee (in white) taxable property in the state. They were concerned they were in a volatile environment. They understood the industries’ concerns and understood that federal deregulation created certain guidelines for them. They believed state and local government should recognize the urgency and fairness of the industries’ request for tax rationalization in light of all of the things that been taking place with technology, and the inadequacy of the tax base. They recognized industries had raised a legitimate and complex problem requiring serious study and prompt resolution. State, local, and industry leaders should be able to agree that a new tax approach should serve the following goals: broaden the tax base, reduce the current taxes, treat comparable services and businesses the same, and establish a predictable revenue that would permit reasonable budgetary planning. They were prepared to cooperate fully in a reasonable approach that avoided piecemeal changes and protected the long-term interest of the citizens of the state. They found themselves in the middle of all those changes and recognized the industry had exhibited the desire to work with them. They simply wanted to make certain that whatever changes the legislature made, a serious study of the Nevada tax system be undertaken. hat would allow the public to have a better understanding of exactly how those changes in technology, federal deregulation and other issues allowing industries to operate in the state with a reasonable rate of taxation. Also allow them to operate without being fearful that competitors would be tax avoider's in the process of competition.

He concluded by apologizing for the fact that the committee was getting that at the last minute. They had brought in experts to help the committee understand and to articulate their concerns in a manner they thought would be meaningful to the members during their process of deliberation.

Chairman Goldwater informed Mr. Hadfield he had read his letter and had a few questions on the issue of central assessment versus local assessment. He had the impression Mr. Hadfield the legislature should not codify it because it needed to be viewed in the light of overall communications or structuring and overall tax in Nevada's tax structure. He asked Mr. Hadfield if that was the issue.

Robert Hadfield responded his group was asking for anything done, to be done in that arena understanding if they changed something it may or may not have ramifications down the road. The problem was they believed the industry was quite capable of explaining some of those issues. They had been unable to articulate their views but in response to the Chairman's question, they were very concerned about their tax base and what may or may not happen. They were telling the committee it was just one piece of a very complicated system that was changing continuously and they did not want to preempt themselves down the road.

Chairman Goldwater pointed out members of the Committee on Taxation had been very careful in what they did, although there were some things they had to do anyway. They had been very careful not to make changes that brought implications because of a tax issue.

The Chair recognized Mr. Marvel for a question or comment. Assemblyman Marvel, addressing Mr. Hadfield indicated he was not really certain how his concerns were addressed in S.B. 383, but maybe in S.B. 411 there were some very legitimate concerns. As a representative of rural Nevada, he depended a lot on line-miles for their tax base in his area for utilities as well as railroads. But S.B. 383 related to just one company that was being centrally assessed. He did not feel the bill should be a problem.

Tom Grady, executive director, Nevada League of Cities, spoke next indicating there were a number of industrial companies that were being centrally assessed. They were concerned the tax base continue to narrow and maybe the legislature should be looking at all of the companies to broaden the tax base and lessen the tax. That was what they felt needed to be studied.

Chairman Goldwater, addressing both Mr. Grady and Mr. Hadfield pointed out testimony from the industry indicated things were not changing, they were now codifying what was current practice. He asked if they were contending that was inaccurate. Responding, Mr. Hadfield stated they thought someone from the Tax Commission or the Department of Taxation would be more appropriate to answer that question. There had been issues discussed to which he had not been participating in so he did not know the answer to the question.

Chairman Goldwater indicated the committee would rely on their good word. The Chair then called on Mr. DiCianno and pointed out the gentlemen contended they did not want the committee to do anything in the bill that could adversely affect the tax base. Testimony from the industry indicated what was going on was current practice, essentially a local assessment and the state was simply codifying that. The committee members wanted to be assured that was the case, and that both the industry's concerns were satisfied as well as those two gentlemen who represented the cities and counties.

Dino DiCianno, deputy director for the Department of Taxation testified with regard to the bill in its whole, the department did not have a position one way or another. Speaking directly to the Chair's question, currently cellular telephones were locally assessed.

Chairman Goldwater asked Mr. Hadfield if that satisfied his concern that approval of the bill would not affect the current practice and current standard, therefore, it could still be viewed in the scope of overall tax reform. Mr. Hadfield replied in the affirmative, indicating he would have to rely on the testimony of the Department of Taxation and the goodwill of the industry to develop a tax system, industry-wide, which would work in the future.

Chairman Goldwater expressed appreciation to Mr. Hadfield and Mr. Grady and asked if there were further questions or testimony from them. Seeing none he closed the hearing, indicating he would allow the members to do some thinking on the issue and would take action at the next work session.

The Chair, upon learning that Ms. Foley was prepared to testify on behalf of Senator Schneider, opened the hearing on S.B. 424.

The bill addressed what had been an ambiguity in the sales tax treatment of photographer's proofs. A photographer's proof was a positive image taken from a negative after a photographic session that was furnished to a customer to allow the customer to assess the quality of the photographer's work. It was generally provided as part of the photographer's sitting charge, and was not a final product. However, the tax treatment of the proof had sometimes been based on other factors, such as the billing procedure of the photographer or photographic studio.

The bill clarified the tax treatment of photographer's proofs by specifying that furnishing of a proof to a customer was part of the photographer's service and not a sale of tangible personal property, and therefore, was not subject to sales tax.

Helen Foley advised the committee that she was representing herself. She was with the public relations and government affairs firm of Faiss-Foley America and they had a gentleman working with them who was a photographer. They sent him to do different types of shooting activities, whether it was a county commission meeting or individual photographs of clients. He had run into a problem with the Department of Taxation last year, when he began being taxed on his proofs and he was saying, "Well, that’s just part of the photographer’s services and I should not be taxed for tangible property until they order their photographs from either a proof sheet or from individual proofs and then he would be taxed appropriately." It was decided the other way by the Department of Taxation.

Ms. Foley understood he appealed and had a hearing before the Tax Commission. He went to Senator Schneider and they brought the issue forward. The Senate Committee on Taxation as well as the full Senate unanimously supported the idea that no tax should be applied until the photographs were ordered, and they would be taxed on that. She concluded that was the gist of S.B. 424.

In response to the Chairman's request for questions from the committee members, he recognized Ms. Gibbons. Ms. Gibbons pointed out Ms. Foley had indicated the tax should not be due until the photos were ordered. She asked if the tax should not be due until the pictures were purchased. Ms. Foley stated the tax would be due with the purchase of those photographs not when ordered, but when the final bill was given for the number of pictures the person ordered.

Assemblyman Marvel asked when the tax was being imposed now and was advised by Ms. Foley it was being imposed twice. It was determined by the Department of Taxation that it should be imposed when the proofs were given to the client. Sometimes there were the photographer’s fees that were attached at different points. Maybe when they went out and did a shoot and again for the proofs. Because the photographer was in the studio analyzing the proofs another bill might be delivered at that time. He was never taxing them on those services; he was only taxing the customers later on when someone said, "okay, I would like this shot and this shot and I want 8 x 10’s or whatever it was."

Assemblyman Marvel asked when were they captured for the tax. Were they capturing any of the front-end fees or just the actual sale of the photo. Ms. Foley stated they believed it should only be the actual sale of the photographs that were selected in the end. The Department of Taxation felt that when proofs were supplied to the person they should be taxed for those proofs.

Mr. Mortensen stated a contract was made between a customer and a photographer and the photographer performed certain services. He went out and shot half-dozen objects, hypothetically speaking buildings, or something like that, and he billed at that point. Would he charge taxes on that service. Ms. Foley replied in the negative adding it was his service he was supplying. He may provide a subsequent bill for the cost of the paper and some of the other hard costs, but he should not be taxed on the proofs. The gentleman who proposed the bill did not believe the photographer should be taxed on the proofs. It was a service.

Mr. Mortenson indicated he was making certain the photographer was not collecting tax and he agreed with the sponsor of the bill. He felt if there was a proof prepared, the customer would not buy anything and if the photographer had paid taxes on the proofs, he was out doubly. He agreed with that, as long as the photographer had not collected taxes on the proofs.

Chairman Goldwater pointed out, before the proposed legislation got any further, he thought it would help if the committee understood what tax was being discussed. Ms. Foley responded it was the sales tax. Chairman Goldwater concurred it was sales on tangible or personal property. He then recognized Mr. Brower for any questions.

Mr. Brower asked Ms. Foley if she could explain, in more detail, the Department of Taxation’s position and why they disagreed with her. In response, Ms. Foley explained she believed they felt because a negative had been turned into a proof and was delivered to an individual, it should be taxed. Other photographers had said they could not look at a negative so the only way to view a photo was by looking at a proof, but the quality of proofs was never as rich as the quality of the final product.

Mr. Brower in order to confirm his understanding reiterated the state’s position was there should have been a tax imposed at the point that she described, even though there had been no sale yet. Ms. Foley responded in the affirmative.

Chairman Goldwater recognized Ms. Gibbons who directed her question to Ms. Foley. She stated she wanted to understand the concept as she had heard those complaints before on the Tax Commission, but she wondered if they had been doing that to all photographers. She did not think that was the case because she had pictures taken and not paid anything. She doubted anyone would think they were earning income off proofs.

Ms. Foley, responding to Ms. Gibbons, explained that had been a problem and was becoming much more frequent. She knew there were several photographers in southern Nevada who were quite upset about it. She referred to a businessman in southern Nevada who ended up having to pay a lot of money over some proofs and the dispute that followed over proofs that were purported to be final products.

Mr. Anderson pointed out what happened occasionally was the photographer sent or gave out the proofs and they were not returned, and then he subsequently billed for his services for whatever was there. Would he then not charge because the customer was keeping the proofs; did he then charge sales tax in that particular type of instance if he had not made a final sale because somebody had not returned proofs.

Ms. Foley, responding to Mr. Anderson, stated she believed the photographer might have assumed the customers thought the pictures were unacceptable, and they did not want them. She understood many times people did not return items, but under the law they would be paying for them because the Department of Taxation was saying they must. The photographers did not feel that was fair.

Chairman Goldwater asked if there were further questions from the committee, there being none, he recognized Carole Vilardo.

Ms. Vilardo, president of the Nevada Taxpayers Association, pointed out there had been numerous issues before the Tax Commission in workshops on graphic arts, artists and regulations. She suggested one of the things that happened, in looking at the regulations, was the proof was a tangible good. A photographer charged for services. The reality for most of those people, it was not what they considered the finished product, and the argument generally had been, it was the finished product. Up to the point the purchaser actually got something they were still at a service level.

It was a policy issue, but for the most part, it was a clarification that was being brought before the committee to say, "at what point do you think we have tangible goods. Is the proof the tangible good? Is it something that I would actually use that’s like buying this. I buy it because I can wear it." When the purchaser had the proof, they were not going to frame it. They were not going to give it away. It was something that, in effect, was an intangible part of the service. The purchaser paid for the service; it may cost $50.00 to sit for that hour or to have the photographer come to a wedding. They would not be paying sales tax because it was a service. Until they had specifically done something that could be hung on the wall, put in a frame, or sent as a postcard, they did not have a product and that was the policy issue before the committee. It was a policy issue of clarification, not an exemption.

Chairman Goldwater asked for questions from the committee and acknowledged Mr. Marvel.

Mr. Marvel stated he was trying to determine when was there a taxable event. He thought when there was a willing buyer and a willing seller, that was the event. Ms. Vilardo replied a willing buyer, willing seller to tangible goods that was not real property. Nevada had a sales and use tax law from 1955 that did not fit business today. She could think of probably two more clarification bills the committee was going to get and they ultimately would be policy decisions for the committee to make. The state was in a very difficult situation, but so was every business that tried to comply because they had never been quite sure what the ground rules were until after they had been audited, fined, and had a deficiency determination.

Chairman Goldwater called upon Mr. Marvel. He felt the language should probably have to be spelled out and that was why he had no problem with the bill. Chairman Goldwater concurring with the statement from Mr. Marvel added the more definition the committee could get that was clear the better off everyone would be. He then asked for any additional questions from the committee. Seeing none he asked if there was anyone else who wished to testify for or against the bill. Seeing none he closed the hearing on S.B. 424 stating it would be placed on the next work session.

The next item of business before the committee was A.J.R. 17.

Chairman Goldwater explained he was under the impression the resolution was a time-sensitive bill, but the deadlines had been waived on all resolutions, therefore, the committee could hear it. There were issues presented in the resolution that merited some discussion; however, he felt the resolution was poorly written keeping in mind it would be included as an addition to Nevada's constitution. It needed a great deal of work so he did not want to burden the committee, as that could be a very long and very dramatic hearing.

The Chair indicated he considered forming a subcommittee to work out the issues so the committee would have before them a clean piece of legislation; a clean resolution which the committee could debate and make their decisions. Mr. Brower had indicated he might be interested in taking over a subcommittee, and he asked the members of the committee if any of them would be willing to work with Mr. Brower.

He pointed out Mr. Mortenson and Mr. Price had indicated they might also like to work with Mr. Brower. He appointed a subcommittee, chaired by Mr. Brower, with members Mr. Mortenson and Mr. Price, as he was chairman of the constitutional issues, to report back to the full committee any suggestions for changing A.J.R. 17. He asked them if they could review the proposed legislation in as timely fashion as possible and report back, the committee would appreciate it.

Chairman Goldwater concluded by asking if there was any other business before the committee, there being none, he thanked everyone for their patience. There being no further business, the meeting was adjourned at 4:05 p.m.

RESPECTFULLY SUBMITTED:

____________________________

Nykki Kinsley,

Committee Secretary

APPROVED BY:

Assemblyman David Goldwater, Chairman

DATE: